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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

Identify each of the following items relating to sections of a balance sheet as Current Assets (CA), Property and Equipment (PE), Current Liabilities (CL), Long-Term Liabilities (LTL), or Owner’s Equity (OE).

  1. a. Accounts Payable
  2. b. Equipment
  3. c. Accounts Receivable
  4. d. Prepaid Insurance
  5. e. Mortgage Payable (current)
  6. f. Office Supplies
  7. g. Mortgage Payable (due in 3 years)
  8. h. Unearned Rent
  9. i. B. Marley, Capital
  10. j. Notes Payable (due in 3 months)

To determine

Identify the given items of balance sheet, as per the given classifications.

Explanation

Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and owners (owners’ equity) over those resources. The resources of the company are assets which include money contributed by owners and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and owners’ equity.

Identify the given items of balance sheet, as per the given classifications.

ItemsClassificationJustification
a.CLAccounts payable is a short-term debt obligation, hence it is a current liability.
b.PEEquipment is a long-lived asset or fixed asset, and is reported under Property and Equipment.
c.CAAccounts receivable is an asset which could be converted into cash within one year, hence, it is a current asset.
d.CAPrepaid insurance is an asset which could be used up within the completion of an operating cycle, hence, it is a current asset.
e.CLThe current portion of mortgage payable is a current debt obligation, hence it is a current liability...

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